On the 2 July 2018, the UK signed new tax treaties with Jersey, Guernsey and the Isle of Man.
The treaties are very similar to each other, incorporating measures reflecting the outcomes of the Base Erosion and Profit Shifting project promoted by the G20 countries and the OECD. The treaties are likely to come into effect once each jurisdiction has completed their parliamentary processes and exchanged written notes – this is expected to be early in 2019.
Some of the key amendments include:
- determination of corporate residency, which will be agreed by the signatories’ competent authorities, rather than determined by the place of management as it is it currently
- an amended definition of permanent establishment and the corresponding allocations of profits
- the elimination of double taxation of dividends, interest and royalties where the income is beneficially owned by a resident of the other contracting state, for certain classes of resident: for interest and royalties. This includes listed companies traded on recognised stock exchanges and companies where less than 25 per cent of the shares or rights are owned by persons outside that territory. The double taxation clauses do, however, differ between Jersey, Guernsey and the Isle of Man
- a principal purpose test for treaty benefits
- assistance with the collection of taxes
- the provisions for information exchange on request.
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